Special Briefing: Bitcoin’s Remarkable Ride
WHY YOU SHOULD CARE
Because everyone’s favorite cryptocurrency doesn’t have to be cryptic.
This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.
WHAT TO KNOW
What happened? Bitcoin is having a good year — and a great week. The price of the world’s leading cryptocurrency climbed above the $10,000 mark yesterday, then topped $11,000 just 12 hours later, capping a meteoric rise that’s seen its value soar more than 1,000 percent this year. Hovering just around the magical $10,000 mark now, the total circulating value of the volatile currency is still above $160 billion — equivalent to the valuation of major corporations like General Electric. But investors and spectators alike are wondering if it’s sustainable.
Why does it matter? Even as experts warn of a bubble akin to the dot-com crash of the early 2000s, the boost in price may lure more investors — and regulators. It could also spur more investment in the many other cryptocurrencies available. Enthusiasts hope these digital currencies will become the new gold standard for safe investment.
HOW TO THINK ABOUT IT
Why now? The decision last month by the Chicago Mercantile Exchange to allow trading on bitcoin futures in December might have had something to do with it. Now more hedge funds are adding it to their portfolio, and the momentum may have made the currency look more legitimate to investors.
Who’s investing in it? The cryptocurrency craze, and bitcoin’s staggering jumps in value, have drawn millions of retail investors, mostly ordinary people. Its inherent volatility is a key reason why many major institutional investors are still staying clear, although they also cite significant regulatory hurdles. Meanwhile, JPMorgan CEO Jamie Dimon has been outspoken in his skepticism of bitcoin. “It’s worse than tulip bulbs,” he says. ”It won’t end well.”
It takes loads of power. Bitcoin is “mined” — think of something akin to a digital printing press — in an extremely power-intensive process involving a computer network that uses more electricity annually than all of Ireland. Need more perspective? Consider this: A single bitcoin transaction uses enough power to boil 36,000 kettles of water.
But really, it’s all about the tech. Arguably even more important than bitcoin is the technology upon which it is built. Blockchain, a virtual ledger where digital transactions take place with unprecedented safety and transparency, has far-reaching and potentially revolutionary implications for sectors as varied as government and underground crime. It could do for commerce and exchange what the internet did for communication. Bitcoin may well be a passing fad, but blockchain is probably here to stay.
WHAT TO READ
Invest in Bitcoin, Even If It’s a Bubble, by Leonid Bershidsky in Bloomberg View
“Somewhere beyond a not-so-remote horizon, today’s hype may result in cheaper and more convenient identification technology with different levels of privacy, cheaper transactions, better ways of making contracts.”
WTF Is Blockchain?! (A Comic Book Explainer) by James Watkins and Eva Rodriguez on OZY
“Blockchain is coming. Like the internet before it, this new shared digital infrastructure is set to transform the economy and revolutionize how you consume media, how you communicate online and even how you vote.”
WHAT TO WATCH
Goldman Sachs’ Jeff Currie says bitcoin is a commodity.
“It’s not that much different than gold. I don’t see why there’s all this hostility towards it.”
Watch on Bloomberg:
Banking on Bitcoin, a new documentary that examines the roots of bitcoin.
“Bitcoin is, like, the largest socioeconomic experiment the world has ever seen.”
Watch the trailer on YouTube:
WHAT TO SAY AT THE WATERCOOLER
While bitcoin is the original cryptocurrency and currently has the greatest market cap, look out for ether, the main currency based on the Ethereum blockchain network. It is currently trading at around $450, after recently hitting an all-time high, and in the past year it has grown 5,000 percent — even faster than bitcoin. Because Ethereum has a better technical setup for real-world applications than the bitcoin network — with companies like Intel, Cisco, Microsoft and more part of an alliance to build products on Ethereum — many analysts suggest that it is a stronger long-term bet. It could become the Facebook to bitcoin’s Myspace — or the Apple to bitcoin’s Nokia.